Amazon's Attractive But Still Overpriced

There is no doubt that Amazon (NASDAQ:AMZN) has been a darling with both Wall Street and the individual investor for some time. The company was thought by some to have almost unlimited growth possibilities and has definitely been the leader in online retailing.

Has the stock hit its peak, or is there room to grow? This graph provided by Barchart shows a 20-, 50- and 100-week moving average and a 14-week turtle chart, which seem to imply the stock price has hit a resistance level:

When I compare the stock price over the last 50 trading sessions to the Value Line Index of 1,700 stocks, it shows that the price weakness has nothing to do with the recession or the market:

Amazon.com, Inc. operates as an online retailer in North America and internationally. It operates retail Web sites, including amazon.com and amazon.ca. The company serves consumers through its retail Web sites and focuses on selection, price, and convenience. It also offers programs that enable sellers to sell their products on its Web sites, and their own branded Web sites. In addition, the company serves developer customers through Amazon Web Services, which provides access to technology infrastructure that developers can use to enable virtually various type of business.

Further, it manufactures and sells the Kindle e-reader. Additionally, the company provides fulfillment; miscellaneous marketing and promotional agreements, such as online advertising; and co-branded credit cards. Amazon.com, Inc. was founded in 1994 and is headquartered in Seattle, Washington. (Yahoo Finance profile.)

Factors to Consider

Barchart technical indicators:

Barchart uses technical indicators from 7 days to 6 months duration to analyze the direction and strength of a stock's current price. Lately the sell signals have been increasing and getting stronger.

80% Barchart technical sell signal

Trend Spotter sell signal

Below its 20, 50 and 100 day moving averages

Barchart computes a technical support level at 175.74

The stock is 26.05% off its 1 year high and 17.95% off its 1 month high

Relative Strength Index 36.11% and falling

The stock is recently trading at 182.61 and below its 50 day moving average of 211.98.

The Barchart hourly trading graph of the last month show a current decline in price:

Although I think Amazon will increase sales and earnings in the long run, I think the price is too high to enter at this point. If I owned the stock, I'd make sure I had stop losses in place, or at least buy some protective puts. If I did not own this stock or wanted to add to an existing position, I'd monitor the stock's price using the 20-, 50- and 100-day moving averages and a 14-day turtle chart like to one attached to decide when the stock price should bottom out.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.